Our flesh pressers should finish racial and financial biases in car insurance tariffs Opinion – NJ.com
By John Harmon, Sr.
If you drive a car in New Jersey, you know that automobile insurance is required by law. What you may not know is that the same law allows auto insurers to charge more, even if you have a pristine driver's license, if you are out of college, have a blue job, rent a house, or even if your creditworthiness is not perfect is.
Correctly. Hiding behind Lizards and Agents in Khakis is a system that allows auto insurance companies to charge higher fees – forcing them either to overpay or overpay – to drivers in New Jersey who only have high school degrees or lower credit scores , if they cannot afford to do without them. Driving and employment relationships can only be reached by public transport or a cycle path. In fact, a driver who hasn't had a ticket or an accident, just graduated from high school and rents an apartment, can pay up to 40% more than the same driver who is a college graduate homeowner.
These practices are clearly wrong, forcing millions of safe New Jersey drivers to pay far more than they should for auto insurance, including those already in a less fortunate financial position, to bear additional unfair burdens.
By basing tariffs on “income proxies”, the auto insurance industry has created an unfair class system that rewards high-income drivers with the best tariffs and penalizes those with a lower socioeconomic status with significantly higher tariffs even though they drive well. Why? Simply put … wealthier people tend to have other assets like houses, RVs, and boats, so they buy more coverage, which means they also tend to make the highest profits for the insurance companies. (Surprise!) So the next time you hear the word “bundle” in a car insurance advertisement, you should realize this – people on lower incomes often have nothing to bundle up.
Case in point: under this discriminatory practice, a person with a medical degree and a DUI conviction on his or her file actually pays less than a restaurant worker with a high school diploma and crystal clear tickets.
Recently, Holly Bakke, the former commissioner for the New Jersey Department of Banking and Insurance, wrote a comment defending this unfair practice. Using misleading scaremongering, she suggested that a ban on the use of income proxies in tariff setting would result in insurance Armageddon for New Jersey residents. Nothing is further from the truth. In fact, the auto insurance industry is doing pretty well in New Jersey. Just remember, you can't turn on the TV without being approached by humorous commercials with mascots and clever jokes, all of which are designed to attract high-income consumers. Do not believe me? Think of all of the commercials that mention bundling.
The sad fact is that pre-existing and systemic racial inequalities in education, occupation, and economic performance mean that the state's black and Latinx drivers are likely to pay more or, worse, not be able to afford car insurance. These biased rate-setting practices have a significant impact on color communities. Without auto insurance, you cannot “legally” drive to work, which further limits options and continues a cycle of oppression. We cannot pretend to be a "land of opportunity" while we humans are secretly stepping down the ladder for higher profits.
However, these practices do not punish individuals for actually being poor. It's a lot worse. To me, the real meaning of social injustice is when someone who is less fortunate is placed in an adverse position and he or she doesn't even know it's happening. In this situation, lower income drivers are not told to pay 40% more for auto insurance in some cases just because they have lower income and the insurance companies have no reason to say so.
Today New Jersey has the perfect opportunity to do the right thing and end this discriminatory practice. Recently, the state Senate passed the Insurance Rates Act (FAIR) (S-111 / A-1657) overwhelmingly 22-9. This bill would prohibit New Jersey CarFair auto insurance companies from using resident education, occupation, marital status, home ownership, and creditworthiness in determining premiums. She is now waiting for action in the assembly, starting with her Committee on Financial Institutions and Insurance, which to date has done nothing to move the bill forward – it is being delayed and not put to the vote.
Not only the African American Chamber of Commerce of New Jersey is looking for fairness. This law has widespread support, including the New Jersey Hispanic National Chamber of Commerce, New Jersey Citizen Action, and the Service Employees Union (SEIU 32BJ).
New Jersey needs to take the opportunity to make a meaningful impact in correcting this gross inequality. I urge you to learn more about these unfair practices at unjustcarinsurance.com and to contact your state lawmakers. Tell them the time has come to create a fairer and more equal motor insurance market for all by supporting the FAIR Act.
John Harmon Sr. is President of the African American Chamber of Commerce of New Jersey.
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